The Tennessean reports the state monitors about 800 felons by GPS. Most of them are sex offenders.

However, auditors found that parole and probation officers were ignoring many of the alerts they received when sex offenders enter a prohibited area, such as a school zone. Only about 18 percent of the alerts were thoroughly investigated.

In 2010, parole officers noticed through GPS that Christopher Federico was living near a daycare in Nashville. They followed up when he failed to attend his sex offender treatment program, pay his state supervision fees and take polygraph tests.

In a July 2010 home visit, parole officers found two children sobbing in a crawlspace.

Authorities rescued the children and Federico was convicted of violating his sex offender provisions.

"These are people that absolutely must be closely monitored, and they never should have unsupervised contact," said June Turner, executive director of the advocacy group Nashville Children's Alliance.

The task of supervising offenders on parole and probation was transferred from the Board of Parole to the Tennessee Department of Correction earlier this year. Legislators have given the state a year to put fix the problems before another audit begins.

The audit attributed some of the blame to inadequate staffing.

While the Board of Parole considered 25 sex offender cases to be the maximum load for parole officers, they actually handle an average of 40 cases.

A 2009 note in Federico's case file warned, "Unable to complete home visit due to time restraints and caseload size."

In another case, Floyd Craig was found in April 2011 living in a home where his wife was running a day care. Craig had been convicted of murdering his first wife in the 1970s and fondling a 12-year-old girl in 2004. He had refused to go to sex offender treatment programs, pay fees or take a polygraph test, according to state records.

A footnote in his file reads, "Sex Offender Unit has had inadequate officer staffing since (December) 2008 and Craig's case has been passed on to new hires who don't seem to stay with the agency long enough to completely address compliance issues in the files."